„The trend is leading away from the fully integrated Telco"

On the development of wholesale business in the context of 5G

What influence will 5G network rollout have on the wholesale business of telcos? Detecon expert Gregor Kellershohn emphasizes the relevance of partnerships as well as the trend away from a fully integrated telco.

Detecon: In your opinion, how will future wholesale partnerships be developed further in the context of important issues such as 5G network rollout?

Kellershohn: 5G presents enormous challenges for MNOs. This is particularly because regulators in many countries have imposed very strict coverage obligations on them. At the same time they are still busy with the 4G rollout. These challenges can only be solved through cooperation. This starts with front-/backhauling: Here, especially in urban areas, energy providers with their close-meshed fiber optic infrastructures are a good option for ensuring connectivity for 5G small cells - and at the same time being able to offer power to locations such as bus stops. Internationally, "neutral hosts" are also becoming established, which provide complete 5G infrastructures to one or more MNOs. In addition, 5G is accelerating the trend towards splitting off TowerCos. And finally, wholesale relationships between MNOs will also strengthen, not only because infrastructure sharing for 5G is mandatory in many countries.

What do you think is the playing field for telcos in terms of OTT partnerships in this 5G era?

OTT players have often been considered a threat to telcos in the past. But that has changed: Already with operator billing, it has been apparent for some time that telco operators can also benefit from 3rd party services with their end customer access. In the B2B environment, there are even some SD-WAN solutions from OTTs that are successfully used by telcos. At 5G, OTT partnerships are even essential for success, since in industrial use cases a large part of the value added is in platforms and specific applications. Telcos that work with partners to build an ecosystem that is able to react flexibly to the requirements of the industry customers have a competitive advantage here.

Let's talk about 5G for industries: What impact will private 5G networks have on wholesale?

What is interesting for industrial customers is that 5G offers MNOs the opportunity to deliver individual solutions through network slicing. However, the newly developing business models for 5G campus networks, based on local spectrum, will be particularly exciting. Industrial companies now have the opportunity to configure mobile networks on their premises according to their individual needs. But they need partners for planning, construction and operation. In addition to system suppliers and system integrators, telecommunications companies play a particularly important role here - especially those that have a high level of expertise not only on the connectivity level, but also in platforms and applications, such as T-Systems. Such activities are also likely internationally outside of the company's own footprint, as shown by Edzcom of Finland, which has entered into a spectrum sharing deal with V&M Telecom in the Netherlands to support 5G campus networks there.

What about the fixed networks - are there any relevant trends you see there?

Here, too, there is a trend away from the fully integrated telco: Even incumbents are not in a position to finance a nationwide expansion without increasing their debt ratio too much. At the same time, financial investors such as EQT, KKR and Macquarie have recognized the opportunity for a comparatively high-yield and secure investment in passive fiber optic infrastructures and are increasingly taking stakes in regional and national infrastructure companies that allow various service providers to access their networks via open access, among other things. There are innovative approaches here of which the long-term success has yet to be demonstrated, such as the Swiss model with two operators on one FTTH network.

Would you consider changing the rules in the coming years? Are there issues that regulators should address around the world to fine-tune the telecommunications industry?

The current situation surrounding the Corona crisis has shown how important efficient telecommunications infrastructures are. For this reason, the allocation of a mobile communications spectrum should serve less than ever to maximize the revenues of the states, but should ensure the best possible coverage - also through suitable wholesale models. In this context, it will also be interesting to observe the success of wholesale activities initiated by regulators, such as in Mexico (Red Compartida) and Malaysia (5G Infraco).

About the person:

Gregor Kellershohn is a Managing Consultant in the Chapter Communication Industries at Detecon with a focus on the economic aspects of 5G and fiber optic networks as well as digital change in companies. He has worked for 25 years, primarily for European telcos, vendors, and public clients.